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Plant Materials, LLC v. Alliance Consulting Group, LLC

United States District Court, S.D. Mississippi, Southern Division

February 13, 2019

PLANT MATERIALS, LLC APPELLANT
v.
ALLIANCE CONSULTING GROUP, LLC, et al. APPELLEES IN RE ALLIANCE CONSULTING GROUP LLC

          MEMORANDUM OPINION AND ORDER AFFIRMING THE OPINION AND ORDER OF THE BANKRUPTCY COURT AND DISMISSING APPEAL

          LOUIS GUIROLA, JR. UNITED STATES DISTRICT JUDGE

         THIS MATTER COMES BEFORE THE COURT as an appeal taken by Plant Materials, LLC, from the March 19, 2018 Order of the United States Bankruptcy Court for the Southern District of Mississippi. (See Bankr. R. 372, ECF No. 2-5.) The appellees are: (1) the debtor, Alliance Consulting Group, LLC; (2) the purchaser of the property at issue, Drying Facility Assets Holding, LLC (“DFAH”); and (3) the former Chapter 11 Trustee and current Plan Agent, Richard W. Cryar. This Court has jurisdiction to hear an appeal of a bankruptcy court order pursuant to 28 U.S.C. § 158. Having considered the parties’ briefs, the record of the Bankruptcy Court, and relevant law, the Court finds that the Bankruptcy Court’s March 19, 2018 Order should be affirmed, and this appeal dismissed.

         BACKGROUND

         Prior to filing for bankruptcy, Alliance was engaged in the production of frac sand, a material that is used in the fracking process.[1] Using a loan that it obtained from Spectrum Origination, LLC, Alliance had built and operated a drying facility on land that it leased from another entity.[2] Elle Investments LLC and Stonehill Institutional Partners LP subsequently acquired the loan. After Alliance began to suffer financial difficulties, a separate entity, Shale Support Services LLC (“S3”) took over the management of the drying facility.

         On October 3, 2013, some of Alliance’s creditors filed an involuntary Chapter 11 petition for relief against Alliance, and the Bankruptcy Court appointed Richard W. Cryar to serve as Trustee. In May 2014, S3 and Cryar, in his capacity as Trustee, entered into an agreement that permitted S3 to continue to operate the drying facility and install a second sand screen to increase production. S3 agreed to pay all expenses incurred for installation of the screen. It also agreed to pay Cryar a per-ton fee for frac sand produced at the facility.

         S3 hired the appellant, Plant Materials, to install the screen. The Bankruptcy Court provided the following description of the project:

S3 owned the Screen and contracted with Plant Materials to install it and to make . . . other modifications. S3 agreed to pay Plant Materials an estimated $162,535.00 per week for this work, which was projected to take approximately three weeks to complete. In fact, Plant Materials worked at the Drying Facility for three months, beginning in June 2014, and billed S3 for an amount that far exceeded the initial estimate.

(See Bankr. R. 374, ECF No. 2-5.) PM claims that S3 did not pay PM for all of the work it performed at the drying facility.

         On August 14, 2014, the Bankruptcy Court entered a Confirmation Order approving the free-and-clear sale of the drying facility to the administrative agent of the lenders, Elle and Stonehill. The administrative agent then assigned its right to purchase the drying facility to the appellee DFAH. The screen installed by Plant Materials was not included in the sale of the drying facility but was acquired by DFAH later.

         On September 13, 2016, the Bankruptcy Court closed the case and discharged the Trustee. Plant Materials filed a Motion to Reopen the case because it claims that the free and clear sale of the drying facility prevented it from filing a lien on the facility for its unpaid invoices. The Bankruptcy Court denied the Motion due to lack of standing. In the alternative, the Bankruptcy Court determined that Plant Materials failed to carry its burden to show cause to reopen the bankruptcy case. Plant Materials filed the present appeal.

         DISCUSSION

         I. Jurisdiction and Standard of Review

          The decision whether to reopen a bankruptcy case is “committed to the sound discretion of the bankruptcy judge and will not be set aside absent abuse of discretion.” Matter of Faden, 96 F.3d 792, 796 (5th Cir. 1996); see also In re Bell Family Trust, 575 F. App’x 229, 232 (5th Cir. 2014). “A Bankruptcy Court does not abuse its discretion unless ‘its ruling is based on an erroneous review of the law or on a clearly erroneous assessment of the evidence.’” In re Yorkshire, LLC, 540 F.3d 328, 331 (5th Cir. 2008) (quoting Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir. 1995)).

         II. Whether the Bankruptcy Court Abused Its Discretion in Holding that Plant Materials Lacks Standing to File a Motion to Reopen

          “A [bankruptcy] case may be reopened on the motion of the debtor or other party in interest . . . .” Fed. R. Bankr. P. 5010. It is undisputed that Plant Materials is not a debtor; thus, the question presented in this appeal is whether Plant Materials is a party in interest. The Bankruptcy Code provides that the term “party in interest” includes “the debtor, the trustee, a creditors’ committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee.” 11 U.S.C. § 1109(b). In a case concerning standing to object to a proof of claim, the Fifth Circuit has held that “party in interest” “generally means anyone who has a legally protected interest that could be affected by the bankruptcy case.” Khan v. ...


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